For a period of one year, beginning on the date hereof, Company will not operate or license others for the operation of any BURGER KING restaurant within the following described territory hereinafter referred to as "exclusive territory," to-wit:

The counties of Bucks and Montgomery, all in the State of Pennsylvania

as long as licensee operates each BURGER KING restaurant pursuant to BURGER KING restaurant licenses with Company and faithfully performs each of the covenants contained.

This agreement shall remain in effect and Licensee shall retain the exclusive territory for a period of ninety (90) years from the date hereof, provided that at the end of one, two, three, four, five, six, seven, eight, nine and ten years from the date hereof, and continuously thereafter during the next eighty years, Licensee has the following requisite number of BURGER KING restaurants in operation or under active construction, pursuant to Licenses with Company:

One (1) restaurant at the end of one year;

Two (2) restaurants at the end of two years;

Three (3) restaurants at the end of three years;

Four (4) restaurants at the end of four years;

Five (5) restaurants at the end of five years;

Six (6) restaurants at the end of six years;

Seven (7) restaurants at the end of seven years;

Eight (8) restaurants at the end of eight years;

Nine (9) restaurants at the end of nine years;

Ten (10) restaurants at the end of ten years;

and continually maintains not less than ten (10) restaurants during the next eighty (80) years.

Licensee and company may mutually agree to the execution of a restaurant license to a person other than the Licensee, herein, if such restaurant license is executed same will count as a requisite number as set forth in paragraph above.

II.

If at the end of either one, two, three, four, five, six, seven, eight, nine or ten years from the date hereof, or anytime thereafter during the next eighty (80) years, there are less than the respective requisite number of BURGER KING operations or under active construction in the "exclusive territory" pursuant to licenses by Company, this agreement shall terminate and be of no further force and effect. Thereafter, Company may operate or license others for the operation of BURGER KING Restaurants anywhere within the exclusive territory, so long as such restaurants are not within the "Protected Area", as set forth in any BURGER KING Restaurant License to which the Licensee herein is a party.

The prospect of exclusivity for ninety years was clearly intended to be an inducement to Family Dining to develop the territory as prescribed and it appears that it had exactly this effect as Family Dining was to become one of Burger King's most successful franchisees. While Burger King considered Carl Ferris to be somewhat of a problem at various times and one who was overly meticulous with detail, it was nevertheless through his efforts which included obtaining the necessary financing and assuming significant risks, largely without assistance from Burger King, that enabled both parties to benefit from the arrangement.

During a periodic review of all territorial agreements we note that as of this date your development schedule requiring ten restaurants to be open or under construction by May 10, 1973, has not been met. Our records reflect eight stores open in Bucks and/or Montgomery County, and one site approved but not manned.

Under the terms of your territorial agreement failure to have the required number of stores in operation or under active construction constitutes a default of your agreement.

If there are extenuating circumstances about which this office is not aware, we would appreciate your earliest advice.

Family Dining raises several arguments in support of its motion pursuant to Rule 41(b).
*fn2"
One of its principal arguments is that the termination provision should be found inoperative because otherwise it would result in a forfeiture to Family Dining. For reasons which have become evident during the presentation of Burger King's case the Court finds Family Dining's position compelling both on legal and equitable grounds and is thus persuaded that the Territorial Agreement should not be declared terminated. Under Rule 41(b) when a plaintiff in an action tried by the Court without a jury has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law plaintiff has shown no right to relief. Inasmuch as termination is the only relief sought by Burger King, it follows that dismissal of the action is appropriate.

Furthermore, the fact that performance is to occur in installments does not necessarily mean that the contract is divisible. Once again, this is a question of the intention of the parties ascertained, if possible, from a reasonable interpretation of the language used. Continental Supermarket Food Service, Inc. v. Soboski, 210 Pa.Super. 304, 232 A.2d 216, 217 (1967). In view of the fact that there was a single promise of exclusivity to have a ninety year duration, assuming the condition subsequent did not occur by a failure to comply with the development rate, the Court believes, consistent with the views previously expressed herein, that the contract was intended to be entire rather than severable.

(b) its existence or occurrence forms no essential part of the exchange for the promisor's performance."

Taking the latter consideration first, it seems clear that throughout the early duration of the contract Burger King was more concerned with a general development of the territory than it was with exact compliance with the terms of the development rate. Burger King offered no evidence that it ever considered literal performance to be critical. In fact, the evidence indicates quite the contrary. Even though McLamore testified that he never contemplated a delay of the duration which occurred with the ninth and tenth Restaurants, he felt a total delay of approximately 19 months with respect to the fourth and fifth Restaurants was nearly in compliance. On the basis of his prior conduct and his testimony considered in its entirety his comments on this point command little weight.

Burger King maintains that Ferris' conduct indicates that he knew strict compliance with the development rate was required. This is based on the several occasions where Ferris expressed concern over non-compliance. However, during the presentation of Burger King's evidence it was established that Ferris was an individual who was overly meticulous with details which caused him to be, in many respects, ignored by Burger King officials. Given this aspect of his personality and Burger King's attitude toward him very little significance can be attached to Ferris' expressions of concern. In short, the evidence fails to establish that either Burger King or Family Dining considered the development rate critical. If it eventually did become critical it was not until very late in the first ten years and in such a way that, in conscience, it cannot be used to the detriment of Family Dining.

As previously indicated, the Court believes that if the right of exclusivity were to be extinguished by termination it would constitute a forfeiture. In arguing that by termination Family Dining will lose nothing that it earned, Burger King overlooks the risks assumed and the efforts expended by Family Dining, largely without assistance from Burger King, in making the venture successful in the exclusive territory. While it is true that Family Dining realized a return on its investment, certainly part of this return was the prospect of continued exclusivity. Moreover, this is not a situation where Burger King did not receive any benefit from the relationship.

In making the promise of exclusivity Burger King intended to induce Family Dining to develop its Restaurants in the exclusive territory. There is no evidence that the failure to fulfill the time feature of this inducement was the result of any intentional or negligent conduct on the part of Family Dining. And at the present time there are ten Restaurants in operation which was all the inducement was intended to elicit. Assuming all ten were built on time Burger King would have been able to expect some definable level of revenue, a percentage of which it lost due to the delay. Burger King did not, however, attempt to establish the amount of this loss at trial.

Our website includes the main text of the court's opinion but does not include the
docket number, case citation or footnotes. Upon purchase, docket numbers and/or
citations allow you to research a case further or to use a case in a legal proceeding.
Footnotes (if any) include details of the court's decision.

Buy This Entire Record For
$7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.